Production Linked Incentive (PLI) Scheme was approved on June 2021 for White Good Manufacturers- Air Conditioners, LED Light Bulbs, Mobile Phones, etc. This Scheme will provide an incentive to the White Good Manufacturers of over Rs. 6,000 Cr. over 5 years from FY21-22 to FY28-29. The application of the window was opened from 15th June 2021 to 15th September 2021. The objective of the scheme is to create complete component ecosystems in India and the country an integral part of the global supply chains, according to the Ministry of Commerce and Industry.
What has happened now?
- Post some modifications in the PLI Scheme by the Government of India, AC Manufacturers like Voltas, Blue Star, Dixon, Amber Enterprises, Lloyd, Hindalco, and China’s GMCC are set to apply for this scheme for AC Components bringing immediate investments of around Rs. 3,000 Cr.
- While some of the companies are hesitating to apply for the scheme and reviewing it again. These companies are Samsung, LG, Godrej Appliances, and Daikin.
- Earlier it was estimated that this PLI Scheme was applicable on AC Components as well as the finished products as well.
- Currently, 7.5 Million Air-Conditioners are produced in the country in a year. Earlier, the target was set to produce 40 Million or 4 Crores ACs in the country.
- Here the Government has made changes to this target on account of the expectation of high export which was estimated to be around 1.6 Cr. ACs out of total targeted production of 4 Cr. ACs per annum.
- In India, 95% of the Air Conditioners (ACs) manufactured in India are sold in India itself. Here, the Government tried to address the situation is regarding the ACs Components where 75% to 80% of the components used for manufacturing ACs are imported in the country.
- Hence, looking at this scenario, the Government made changes to the scheme and made the incentives available only for Component Manufacturing and not finished products.
- Therefore in this situation, Voltas and Bluestar are two stocks that can be highly benefited by this move.
Here the possible situation which could arise is that PLI Scheme would be provided to the players for finished products only if it manufactures Components in the country too. But as of now, this PLI Scheme is strict only for Component Manufacturing for ACs Manufacturers. If the Component Manufacturing in the country goes well, it could also lead to the profitability of the companies. The current capacity also holds good export traction which can grow healthy be around 4-5 times in the coming years. This could be a piece of good news specifically for Indian ACs Manufacturers. Do follow your due diligence before making any investment decisions.